The World Bank predicts that by 2020, China will be the world's second-largest trading entity after the U.S. but ahead of Japan and Germany. These developments will have important consequences for Hong Kong, given the growing integration of Hong Kong and the mainland. These will provide new challenges as well as opportunities for purveyors of logistics services. Tradelink Talk recently discussed these and other issues affecting Hong Kong's role as the hub for the world's most important manufacturing region with Sandra Lee, Permanent Secretary for Economic Development and Labour (Economic Development) of the Hong Kong Special Administrative Region, and vice-chairman of the Hong Kong Logistics Development Council.

Tradelink Talk: Under World Trade Organisation concessions, more foreign logistic purveyors may be attracted to China. What can Hong Kong do to stay competitive?

With China's accession to the WTO and its further integration into the world trade regime, more cargo will route through Hong Kong to or from the rest of the world, even with more direct shipping via the Mainland ports. To prepare for the challenges and to ensure sufficient handling capability, we started building Container Terminal 9 in 2000. The first berth commenced operation in July. Upon completion in 2005, CT9 will provide an additional handling capacity of more than 2.6 million TEU per annum. We are also mapping out Hong Kong's port development and competitive strategy up to 2020, known as the Port Master Plan 2020 Study.

Tradelink Talk: Can Hong Kong keep its position as the world's largest air cargo terminal as more airports open in the Pearl River Delta?

There is not another airport in this part of the world with nearly the number of destinations we have. Nearly 70 international airlines operate at the Hong Kong International Airport, providing more than 4,100 scheduled flights every week and connecting Hong Kong with over 140 destinations around the world. We have been named the Best Airport of the Year for three consecutive years and the busiest international cargo airport since commissioning in 1998. But we are not just sitting on our laurels. We always seek to enhance cooperation with other airports in the Pearl River Delta. Through the A5 [airports] Forum; we explore opportunities for mutual benefits in order to achieve a "win-win" situation. We also seek to enhance our competitiveness by expanding air services networks and extending the catchment area through development of inter-modal links.

Tradelink Talk: How will CEPA enhance the flow of goods as opposed to simply lowering trade barriers?

CEPA allows Hong Kong companies greater flexibility and business opportunities when operating in the Mainland. They will gain access to the Mainland services markets ahead of their foreign counterparts, and establish their foothold before China swings its door wide open to other WTO members. We expect that closer cooperation would be enhanced between Hong Kong and the other mainland cities, in particular those in the Pearl River Delta region. Cooperation would exist between the airports and container ports. We will enhance our coordination and cooperation with the Mainland through the established mechanism, including the Hong Kong-Guangdong Cooperation Joint Conference and the Mainland/HKSAR Conference on Coordination of Major Infrastructural Projects. In addition, Hong Kong must enhance its digital infrastructure. We have to educate our entire industry. Everyone, even truck drivers, must upgrade themselves in terms of information technology.

Tradelink Talk: Industry claims to lose billions because of bottlenecks at the China-Hong Kong border. What is being done to smooth and simplify customs clearance procedures?

Providing a seamless boundary has always been high on our agenda as it improves the efficiency of freight movements and reduces costs. At Lok Ma Chau, our busiest land boundary crossing with the Mainland, we have provided more lanes for handling cross boundary vehicles, extended operating hours and opened more 24-hour clearance lanes for good vehicles, streamlined procedures and enhanced the use of information technology. As a result, our Customs is now able to clear a laden vehicle within an average of 33 seconds and an empty vehicle within an average of 16 seconds (compared with 45 and 20 seconds in 2001). A recent survey conducted April 2003 indicated that 97% of northbound vehicles and 84% of southbound vehicles can complete a cross boundary journey within one hour, compared with 79% and 67% respectively in 2002. Major cross boundary transport infrastructure projects are at different stages of planning and construction, including an additional bridge linking Lok Ma Chau with Huanggang, the Shenzhen Western Corridor and the proposed Hong Kong-Zhuhai-Macau Bridge. They will further enhance our capacity for handling cross boundary vehicles. there is only so much we can do on the existing boundary check point because of the physical constraints, we will continue to consider ways to ease the flow of people and cargo.

Tradelink Talk: What is the government doing to get more SMEs to use e-commerce?

The LOGSCOUNCIL held two workshops in 2002 for industry practitioners to exchange views and develop plans to promote the use of IT in the logistics sector. Participants supported the development of the DTTN as a convenient, user-friendly and low-cost channel for SMEs to adopt e-commerce. Financial assistance is available under various SME funding schemes for the acquisition of office equipment, such as computers. The Continuing Education Fund also provides financial assistance for training. Logistics SMEs should make the best use of these resources

Tradelink Talk: In that light, bring us up-to-date on what's happening with the SMEProject Group.

The S-logistics Project Group is collaborating with the Polytechnic University, Hong Kong's Productivity Council and the Hong Kong Institute of Vocational Education to launch tailor-made courses for meeting the practical needs of senior executives of freight forwarding SMEs and front-line staff on warehouse and inventory management. We organised a seminar on July 5 for logistics SMEs to explain their mode of operation and financing needs to representatives of lending institutions. Over 70 bank representatives and some 150 logistics SMEs owners and senior executives attended. We also organised a briefing cum consultation session on July 23 for logistics SMEs to inform them of CEPA offers for the transport and logistics service sectors, and seek views on implementation issues.

Tradelink Talk: How much progress is being made in the formation and implementation of DTTN?

The E-logistics Project Group invited proposals on the development of the DTTN in April and received three submissions. After a careful and thorough assessment, the LOGSCOUNCIL considered that the submission from Tradelink is the closest to the blueprint enshrined in the DTTN study. We recommended at the meeting on July 15 that the Government should jump start the project and enter into discussion with Tradelink immediately with a view to concluding an operating agreement with the company as a DTTN service provider. We agreed we should also ask Tradelink to further improve its proposal to meet the proclaimed principles, standards and requirements as far as practicable. We briefed the Economic Services Panel of Legislative Council at a meeting on July 28 and secured members' support on the way forward.

Tradelink Talk: It has been a year and a half since the formation of the Logistics Council. What has it accomplished specifically so far?

Significant improvement has been made in extending the operating hours of the border crossing at Lok Ma Chau and enhancing its handling capacity, thus reducing cost for the logistics industry. Major studies completed also charted the way forward for important projects like the DTTN system, the value-added logistics park at North Lantau and measures to enhance the competitiveness of SMEs in the logistics sector. An international study mission and various logistics seminars were organised for the practitioners. Participation in the Air Cargo Forum in Hong Kong and the Hong Kong Logistics Services Conference and Expo in Guangzhou offered LOGSCOUNCIL the opportunity to showcase Hong Kong's logistics strengths to a wide audience nationally.

Tradelink Talk: Besides DTTN, what other important project is the LOGSCOUNCIL overseeing at the moment or planning in the near future?

We're working on the development of the Value Added Logistics Park at North Lantau, development of a Qualification Framework for the logistics industry, renewing the partnership with the Trade Development Council in staging a logistics conference in March in Guangzhou. We plan to collaborate with a renowned event organiser to stage an international logistics conference cum exhibition in Hong Kong in May 2004.